About Lantronix Inc.

As millions of people flocked to Beijing last week for China's largest Apple expo, executives of an Irvine-based tech company came to show off a marquee product.

A gold sponsor of Macworld iWorld Asia, Lantronix Inc. held demonstrations of a device that allows users to print directly from iPads and iPhones. The small white box, about the size of a deck of cards, has won praise from reviewers, but the Lantronix team wasn't there merely to win a few more accolades.

The event was the latest step in the company's concerted effort to establish a presence in China. This month, Lantronix opened a Shanghai office, its first in mainland China, and announced a partnership with one of the country's largest e-commerce retailers.

“We're building our brand name in mainland China,” said Kurt Busch, the company's chief executive. “This is a major growth area … and one that Lantronix needs to take advantage of.”

Lantronix joins a growing list of local companies trying to gain a foothold in China. The country's torrid economic growth has made it an attractive destination for a variety of businesses, including information technology companies, medical device makers and book publishers.

“China is a large and growing market for Orange County businesses,” said Wallace Walrod, chief economic adviser to the Orange County Business Council.

Networking ‘pioneer'

Lantronix specializes in machine-to-machine networking, or technology that allows electronic devices to communicate with each other. The products can connect computers to remote networks, facilitate wireless printing or help transmit data across long distances.

While many of the products are sold to business clients, one of the company's more popular devices is the consumer-targeted xPrintServer, which makes it possible to print from iPads.

In 1989, well before desktop computers and mobile phones became ubiquitous, Lantronix got its start building peripherals for computer equipment. As Busch puts it, the company has been active in the electronic connectivity space since before many people even knew what it was. “The company was a pioneer in machine networking,” he said.

Lantronix has had some struggles lately. Revenue was down in three of the last four years and its stock price, which traded near $12 a share prior to the recession, closed last week at $1.54 a share.

Part of the problem, executives said, was an unsuccessful foray into software development. In 2011, in an effort to bring the focus back to the company's core business, the board hired Busch, then an executive with semiconductor company Mindspeed Technologies Inc.

For Busch, a major focus has been growing the company's international sales. About half of the company's revenue comes from overseas, primarily Europe and the Middle East. In the first quarter, the Asia-Pacific region accounted for 17 percent of its $12 million in sales, but Busch said “revenue is very light in mainland China.”

“We have not had very good penetration into the mainland China marketplace,” he said.

A recent study by Vodafone found that the Asia-Pacific region, fueled by growth in the China market, is adopting machine-to-machine networking at a far faster rate than either Europe or the Americas. By 2015, 62 percent of Asian companies expect to have adopted the technology, compared to just 35 percent in the Americas.

To capitalize on the trend, the company appointed a new regional director for the Asia-Pacific market late last year. Lantronix has an office in Hong Kong, and executives opted to add a Shanghai office this month to better pursue business opportunities within China.

“To service mainland China we really have to have an office in mainland China,” Busch said. “We will be growing out the China office.”

Resources available

Lantronix is one of a large and growing number of Orange County companies eyeing the market.

“Every company is beginning to feel that China is more than just a supply chain option,” said Richard Swanson, regional director for the Pacific South of the U.S. Commercial Service, an arm of the U.S. Commerce Department's International Trade Administration.

Swanson, who had helped Lantronix get into the European markets in the 1990s, said many U.S. companies are now looking beyond Shanghai and Beijing and trying to penetrate even second- and third-tier markets in China.

For Orange County companies with overseas ambitions, there are a number of local resources, including consultants, trade professionals and intellectual property lawyers. The Orange County Business Council has hosted panel discussions for companies looking to do business in China.

Swanson said the first step a company should take is to reach out to the International Trade Administration, which has regional offices in Irvine. The organization offers a variety of services, including counseling, providing commercial intelligence reports and making connections with distributors. The department charges modest fees for certain programs, but most services are free.

While Swanson is bullish on the business opportunities in China, he warned that companies need to be realistic about the difficulties in expanding into such a large and competitive market.

“The No. 1 challenge is that it is a huge market,” Swanson said. “You need to get good, solid advance commercial intelligence. You need a strategic plan.”

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